Sales and operations planning is a monthly cycle that brings demand planning, supply planning and financial planning into one agreed number. The five-step process is standard. Whether it works depends on whether finance has someone operations will actually listen to.
What sales and operations planning is
S&OP exists because three plans in a physical-goods business are usually inconsistent with each other. Sales has a demand plan. Operations or manufacturing has a supply plan constrained by capacity and lead times. Finance has a budget. Left alone, all three run on different numbers and the business discovers the gap as either a stockout or a warehouse full of the wrong thing.
The cycle is monthly by design, which matters more than it sounds. A quarterly version does not react fast enough to be worth the meetings, and a weekly version turns into expediting rather than planning. How the inventory those plans move is measured and valued sits under the AASB accounting standards, which is the reason finance has to be in the room rather than receiving the output afterwards.
The five steps
The traditional process runs in a fixed order, and skipping a step is the most common way it degrades into a status meeting.
| The step | What has to be true before you move on | |
|---|---|---|
| 1. Data gathering | Pull actual sales, inventory and production data | Everyone agrees the numbers are the numbers. If this step is still being argued in step four, nothing downstream is real. |
| 2. Demand planning | Sales builds the unconstrained demand forecast | The demand plan is what sales believes, not what the target says. Those are different documents. |
| 3. Supply planning | Operations tests demand against capacity and lead times | The gaps between what is wanted and what can be made are quantified, with the cost of closing each one. |
| 4. Pre-S&OP meeting | Middle management reconciles the two plans | Everything resolvable is resolved here, so the executive meeting sees only genuine trade-offs. |
| 5. Executive S&OP | Leadership signs off one number | A decision is made and the financial plan is updated to match. If the budget does not move, the process was theatre. |
What it is actually worth
The returns claimed for S&OP are improved forecast accuracy, lower working capital tied up in stock, fewer stockouts, and cross-functional alignment. The first three are measurable and you should insist on measuring them. The fourth is the one that carries the others, and it is not a software outcome.
You can see the shape of the job in what the role actually asks for. A financial controller in an inventory-heavy business owns management accounts, FP&A, budgeting and forecasting, working capital and cash flow, plus inventory and stock, including managing the floor plan and profitable stock movement, and does significant business partnering with operational stakeholders across the shop floor, the sales team, the service desk and spare parts.[1] That is a list of S&OP participants written as a position description.
Why the tooling is rarely the blocker
There is a large market of S&OP and demand planning software, and most of it plugs into an ERP. If your data is clean it will help. If it is not, it will produce the same disagreement faster.
The same constraint shows up in every automation conversation in this part of the market. The businesses at the front of adoption are very digital and tech heavy, because a software business is simple enough to plug into. An inventory-heavy business selling physical goods is much harder because of the nuances, and where there are legacy data issues or imperfect infrastructure it gets harder again, particularly at scale, which is why most larger businesses with a stock component are not very advanced at all.[2] Buying a planning tool before the data definitions are agreed is the expensive version of that lesson.
The demand side of the cycle is really a revenue forecast with a capacity constraint bolted on, and the same data problems apply.
Who runs S&OP in a growing Australian company
Ownership is genuinely shared, which is why it needs a chair. Demand planning belongs to sales, supply planning to operations, and the reconciliation to finance, with the executive meeting chaired by someone senior enough to make the call when the two plans do not meet.
The capability that decides this is business partnering, and it is the one most often missing. On a recent inventory-heavy search the four capabilities were management accounts and FP&A including budgets and forecasts, working capital and treasury, inventory and stock management, and business partnering, and the previous incumbent's gap was specifically the business partnering. A candidate with enough capability in a stock-heavy business was plenty, even without direct industry experience.[3] Technical inventory accounting is learnable. Being credible on a factory floor is not, at least not quickly.
On when to bring that person in permanently, it depends on the shape of the business rather than the headcount. A single-product SaaS company can often run on fractional support until Series C, while complex deep tech with R&D and inventory needs a CFO much sooner.[4] If you are running an S&OP cycle at all, you are almost certainly in the second group.
If nobody currently owns the reconciliation, look at how the finance team is structured before you look at software.
Common questions
What is sales and operations planning?
Sales and operations planning, or S&OP, is a monthly cycle that reconciles the demand plan owned by sales, the supply plan owned by operations, and the financial plan owned by finance into one agreed number. It runs in five steps: data gathering, demand planning, supply planning, a pre-S&OP reconciliation and an executive decision meeting.
Why is S&OP run monthly?
Monthly is the cadence that matches most manufacturing and replenishment lead times. A quarterly cycle cannot react fast enough to be worth the meeting time, and a weekly one collapses into expediting rather than planning. The point of the cadence is that decisions get made on a predictable rhythm rather than in response to a crisis.
Do you need S&OP software to run the process?
No. Software helps once data definitions are agreed and the sources reconcile. Before that it produces the same disagreement faster. This is more acute in inventory-heavy businesses, where legacy data issues and imperfect infrastructure make any automation harder than it is in a purely digital business.
Who should own S&OP in a scale-up?
Demand planning belongs to sales, supply planning to operations, and the reconciliation to finance, with an executive senior enough to break a deadlock chairing the final meeting. The capability that decides whether it works is business partnering: a finance leader who can sit with operations and be believed. Technical inventory accounting is learnable, credibility on the floor is slower to build.
References
- From an inventory-heavy financial controller brief Tom Hunter wrote: the responsibilities include management accounts, FP&A, budgeting and forecasting, working capital and cash flow management, and inventory and stock, especially managing the floor plan and profitable stock movement, with significant business partnering across the shop floor, sales team, service desk, finance and spare parts.
- Where I think the technology bites: the businesses at the front of adoption are very digital and tech heavy, because they are much simpler to plug into, while an inventory-heavy business selling physical goods is very difficult because of the nuances, and legacy data issues or imperfect infrastructure make it harder again at scale, so most bigger businesses with an inventory component are not very advanced at all.
- From a recent inventory-heavy search: Tom Hunter identified four key capabilities, being management accounts and FP&A including budgets and forecasts, working capital and treasury management, inventory and stock management, and business partnering. He noted the previous incumbent's gap was the business partnering, and advised that a candidate with enough capability in an inventory or stock heavy business would be plenty even without direct industry experience.
- From a placement I worked on: the timing varies by business model, because a single-product SaaS might use fractional support until Series C while complex deep tech with R&D and inventory needs a CFO sooner.